Hydrogen has become a major element and transition vector of the future global energy supply. Until now hydrogen as an energy carrier had only a minor B2B role and hasn’t been regulated as a commodity. A non-existent market must be set up from scratch, including regulations, standardization, certification, ownership definitions, and more. incorporating the whole (new) H2 value chains. Additionally, geopolitical considerations including the security of supply, energy sources (supply) diversification, and affordability pose further (new) constraints but also open new opportunities, especially for companies owning the know-how and having the innovation potential which can support the energy transition.
With the hydrogen economy unfolding, most European countries presented their hydrogen strategies, but only Germany, The Netherlands, and Belgium linked both: a) targeted regulatory (EU compliant) measures and b) financial means (e.g. H2Global mechanism) to stimulate the deployment of a hydrogen economy. The UK has serious ambitions too. These countries are frontrunners, allies, and competitors at the same time. They need a quick and effective transition from fossil-based energy carriers towards increased economic value from low carbon and renewable hydrogen for their economies combining domestic production with significant imports from the “sunbelt” countries. France’s and partly UK’s focus on electrolytic hydrogen supplied by nuclear-based electricity poses heavy political and public discussions with other EU member states (while being taxonomy aligned) and Eastern European countries additionally seeking their opportunities in biogas (blending into NG) as well as upgrade solutions for (renewable) hydrogen production.
Addressing the regulatory environment, the EU has stepped in, but a variety of unpreceded challenges put EU regulators in a difficult situation, starting with the basic definitions of low carbon and renewable hydrogen. The lack of skilled subject matter experts able to link and translate all different technical layers into meaningful and workable legislation, German-controlled EU Commission, diversity of national EU MS interests, and green-left leaning European Parliament, resulting in ever repeating decision postponements, delays in delegated acts implementation, non-transparent and often chaotic financing mechanisms (e.g. IPCEI), etc. in times where regulatory certainty and investment (planning) predictability are crucial preconditions for the fast and effective energy transition.
Key interacting factors of the future hydrogen economy rollout in Europe:
– European and EU MS politicians communicate renewable hydrogen (green) as their preferred (only) option, but facts and reality suggest it will be a mixture of renewable and low carbon hydrogen (blue (CCS/CCUS) and pink (nuclear)) for decades to come if the foreseen demand is to be met.
– Imports of hydrogen will play a critical complementary role, especially in the initial stages ahead of the domestic production ramp-up.
– Initial demand will come from Energy intensive industry (EII), followed by transport. Risks & opportunities associated are mainly related to the large quantities EII (steel, chemicals, glass, cement) will absorb as well as the form/medium H2 will arrive in Europe (imports) with initial large amounts expected to arrive in form of ammonia or other PtX products. The “molecular” hydrogen economy should be a priority.
– Sufficient renewable electricity production and network capacity to supply new electrolyzers (additional to general electrification efforts) in Europe will cause delays in implementation (regulatory requirement of additionality and geographical correlation).
– Certain industrial sectors are bound to specific short- and medium-term solutions – e.g. production of certain chemicals relies on low carbon hydrogen (often a word “circular H2” is used), due to the nature of their processes, availability of renewable hydrogen, and particularly costs of renewable hydrogen as an ultimate alternative.
– Slow regulatory and public financial support mechanisms do not unfold expected demand (just yet), translating to a lack of investment clarity for electrolyzers producers. Investments are already leaning towards the U.S. due to clear signals for public support for renewable (green) hydrogen.
– Uncoordinated interplay amongst different public authorities, private stakeholders, and the general public at the EU as well as national levels (Issues under consideration: sustainability, energy efficiency, end-use priority, environment, costs, technological neutrality)
– Scattered external policy approach and strategy on how Europe wants to position in Global hydrogen (commodity) markets.
Main characteristics of the (expected) future hydrogen market and related regulatory challenges
The future European hydrogen (commodity) market in form of H2 clusters, will evolve based on the geographical distribution of hydrogen demand around large industrial and transportation hubs: ports, airports, large urban areas, manufacturing, and logistics centers. Success and speed of the (internal) market rollout will depend on the EU’s ability to stimulate and implement multi-national/cross-regional plans enabling the roll-out of a hydrogen supply chain (production, pipelines, underground hydrogen storage, packaging centers, refueling stations) and technological innovation (production).
Quoting recent study commissioned by France Hydrogen (A road-map for an ambitious Hydrogen strategy), individual country’s success will depend on:
a) speedy implementation of the related revised EU legislation (e.g. Renewable energy Directive)
b) Simplifying and speeding up the administrative (permitting) formalities,
c) Supporting the development of a dense network of refueling stations along major roads,
d) Support the development of Giga factories (for electrolyzers, fuel cells) with the help of capital expenditure grants networks,
e) national strategy to secure sub-components for European manufacturers,
f) Support investment in R & D and an increase in manufacturing capacity relating to key sections of the value chain,
g) Accelerate the roll-out of renewable energy,
h) Acknowledge and encourage the recognition that low-carbon electricity, regardless of how it is produced, has an important role to play in producing hydrogen,
j) Adapt and improve the rare materials recycling sector.
Considering the above the transition will not happen overnight. To progress at the fastest speed possible, all (at least) low carbon technologies for H2 production will have to be utilized and realistic “deadlines” will have to be put in place to give all market participants certainty and flexibility they seek.
Jernej Vernik webpage 